On Thursday, the Wall Street Journal reported that, "executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008." That works out to a colossal $145 billion in compensation, the most ever and only a year since the federal government's $700 billion bailout of those same firms.
Written by Stephen Grocer, the Wall Street Journal article quotes Mike Shah, a lawyer at Jones Day who advises companies on executive pay, employee benefits and corporate governance. After observing that, "the companies have done well since the meltdown," Mr. Shah admits that, "some of it has to do with government assistance." Still, he maintains that the pay packages of his clients is the result of working harder than the average man: "You can't just say, 'There is a lot of populist anger out there, so we are not going to compensate our executives who have worked hard to recover some shareholder value.' "
For perspective, consider that the 2009 compensation packages for Wall Street CEOs, traders, and bankers is approximately equivalent to the entire annual economic output (GDP at official exchange rate) of Egypt, a country of 83 million people, according to the CIA World Factbook, an online atlas maintained by the US government.
Meanwhile, 1 out of every 45 US homes (2.82 million total) was subject to at least one foreclosure filing in 2009. As a record, this number is a 22% increase over 2008 figures and represents 2.2% of total US homes, according to RealtyTrac, a company that monitors foreclosures nationwide. With more than 10% of homes in foreclosure, Nevada leads all states in terms of percentage while California, where 632,573 were subject to foreclosure in 2009, has the most overall.
Fueling the foreclosures is the continuing loss of jobs; the Department of Labor reported that in December, 85,000 jobs were lost. The media reports the unemployment rate at about 10%, however, this is only achieved by refusing to include the sixth and final category of unemployment used by the Department of Labor, part time workers who want to work full time, but cannot due to economic reasons. By this broader measure, the US unemployment rate stands presently around 17.3%.
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Comments
Remember that Austrian economics book by Hazlitz? It started a conversation on conservative economic theory this weekend and a friend suggested that executive bonuses and salaries reflect the market in that it represents the level of risk he/she takes on by become a face/head of a company. I guess there may be the argument that a company's CEO "works harder" than the average man... but then when his company had to be bailed out by taxpayer dollars, shouldn't the market compensate the public for saving that CEO's ass... and shouldn't that compensation come out of the failed CEO's paycheck?
TRex,
Wall Street CEOs vulnerable to the same conditions as workers -- this is a pleasant fiction. Libertarian commentators say that the solution is simply to fire the failed CEOs and hire those who might promise success. However, they're looking at things through a very strong hallucinogenic.
Consider the phrase, "too big to fail". It's used when a company, so large as to constitute a substantial fraction of its native industry, somehow fails to pull a profit and needs to be bailed out by the people who would suffer if said company's vital services were discontinued. If any company or industry is "too big to fail", that is, if its failure is disastrous to the people, then that company or industry is already a socialized element of the economy. In other words, CEOs of companies that are "too bug to fail" should be seen not as businessmen but as rogue public ministers running their ministry for the benefit of a select few.
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